Search brisbanetimes:

Search in:

Should salaries be secret?

Probably not a good idea to listen in to the salary negotiations of others...

There’s only one thing worse than not getting a merit-based pay rise: watching your boss get one. As you work harder than ever, for no extra pay, your manager snares a juicy merit-based pay rise, bonus or promotion.

Naturally, you ask: “why am I slaving away to help my manager secure his or her next big pay rise and promotion, while I go without?” And you question why the pay-rise pool is almost always dominated by executives, managers and their favourite staff.

With wage growth in Australia at a 17-year low – and likely to remain subdued for some time – companies will have to work harder than ever to contain staff resentment towards colleagues who receive big pay rises. And show an unusual – and perhaps unnatural – degree of sensitivity on this issue.

I once worked for a US strategy consulting firm that had a strict rule on pay discussions. It was almost a sackable offence to disclose your salary to a colleague. Pay rises were shrouded in secrecy, bonuses were a mystery, and nobody “celebrated” pay gains in front of colleagues. The firm’s old-school approach worked because high-performing staff knew they would be rewarded.

Advertisement

What’s your view?

Is it time for more companies to bring back “gag” orders on salary and pay-rise discussions?

Do you disclose your salary and annual pay, or lack thereof, to colleagues?

Does your boss or manager show restraint with their pay rises when times are tough?

Would more discretion around pay-rise time limit the fallout from staff who miss out?

I’m in two minds about gagging staff on salary and pay-rise discussions. It rarely works in the long run. Staff who miss out on pay rises eventually talk. Or they speculate about their colleagues’ salary and pay rise, fuel vicious office politics, and implode professionally. Younger staff, in particular, may feel more compelled to discuss their income with their peers.

Banning salary discussions can also be demotivating. I recall a US investment bank that had a highly transparent salary and bonus system. Dividing the bonus pool was almost an end-of-year blood sport. It was brutally effective: you had to compete vigorously to get your share, but there were few secrets or surprises.

Moreover, implementing a policy to not talk about pay rises, or glossing over unfair wage inequality, is a dumb approach. Better to have an open, honest conversation about why wages have been frozen and merit-based pay rises are scarce. And to still put your case forward for a pay rise if you deserve one.

That said, companies can take some simple steps to reduce the fallout from a shrinking bonus pool and fewer merit-based pay rises.

The most obvious is managing staff expectations. I’ve seen too many managers over the years tease employees with the prospect of a pay rise to get them to take on more work and responsibility. Good managers have a knack of motivating staff without having to always offer more money, and they never promise something they cannot deliver.

Providing more information on company and industry trends also helps manage expectations. Some staff anchor pay expectations to the past; they wonder why the person who previously had their job was paid $30,000 more. Or they are unaware of current market rates for their position. Or they base pay-rise expectations on longevity; they haven’t had a rise for three years and believe they are due for one, even though they are paid market rates.

The performance-review and pay-rise process is equally critical. Managers are usually eager to explain to staff why they received a big rise, and praise and motivate them. They often say nothing to staff who miss out, leaving them to stew on the poor communication. Having these difficult conservations can make a world of difference to staff who feel unloved and unrewarded around pay-rise time.

Companies should also ask staff to show greater discretion with bonuses and merit-based pay rises in this work climate. Gloating about a pay rise or bonus is a terrible look at the best of times, let alone when real wages are going backwards for many people, after inflation.

Flaunting a big promotion or other career success is equally galling when many colleagues are worried about job security and how they would cope with a forced redundancy. Companies need to ensure their managers lead from the front, if not with pay restraint, then in the message they send to staff through their words and body language around pay rises.

Most of all, managers need to recognise is some staff are near breaking point, as their hours and responsibilities rise, while their pay flat-lines. Persistent poor communication of the policies and processes behind merit-based increases could snap the back of even the most motivated employee if wages growth is anaemic for the next few years, or slows even further.

31 comments so far

I have worked in salaried positions now for some 24 years and everywhere I have been it is has been a secret service approach to salary. Nobody is to talk about what they get or what somebody else may get. I personally see it as divide and conquer as yearly bonuses are usually a joke and salary increases are generally linked to the CPI or if you are luck a tad more. Then off course you have to work the hours required to get the job done and do not dare winge about the hours you may be expected to put in to achieve that. So from my experience unless you are on 200K plus, a salary does not work. Better off on a decent hourly rate.

Commenter

Neweyboy

Location

Newcastle

Date and time

August 21, 2014, 7:43AM

I think it is a big mistake to confuse two different, and very difficult, issues. Whether salaries should be confidential is one thing, but the idea of giving managers bonuses but not staff is very different. I have never, ever seen this have a happy ending. Either bonuses are given to all who have them included in their compensation or not. (Within the one division of course. I can understand why one division deserves them and another does not.) But every time I have seen a manager openly collect a bonus and deny the staff, I have seen things fall apart. You should redo this article separating the two issues.

Commenter

John

Location

Melbourne

Date and time

August 21, 2014, 9:27AM

Whether it is company policy or not to keep salaries secret (and it usually is), the secrecy is only as good as the people (HR) who guard it.

Having worked at a very large listed company where some dope in HR managed to dump an Excel file containing salary (and other details like accrued long service leave etc) of EVERYBODY in the company from the CEO down into the root directory of a shared drive - without password protection then secrecy flies out the window.

Of course secrecy is a divide and conquer policy - it also allows managers to reward their 'pets'. The contents of that file were most illuminating...

Commenter

Foxxster

Date and time

August 21, 2014, 9:29AM

That would have be so much fun to read!

Commenter

John

Location

Sydney

Date and time

August 21, 2014, 10:23AM

It would have been even more fun to watch the nuclear fallout!

Commenter

Dougal

Location

Oz

Date and time

August 21, 2014, 3:27PM

In the UK, where there has been flatlining pay, they've always wondered why productivity is low. Economists had assumed that pay was low because productivity was low. They've recently been thinking that perhaps productivity is low because pay is low (ie flatlining). Ie, people have adjusted their work outputs to the pay they're now receiving. Perhaps it's time we took the same approach. If you're not going to get a payrise to take on more work or hours, then cut back/go on a "go slow". If it's done over a year, you can settle into a more sustainable model of work.

Commenter

David

Location

Melbourne

Date and time

August 21, 2014, 9:58AM

What everyone earns should be posted on a easily viewable noticeboard at work. This is really the only fair and transparent way to employ people, why it is not common practice is beyond me. Likewise everybody's performance objectives and ratings should also be accessible to prevent the sort of corrupt practices that exist in every business and company I know of. Having said that it had hardly been difficult to obtain access to payroll reports over the years , often left in the printer or similar. Bonuses should also be applied company-wide right down to the cleaners, with a clear and published process and what sort of share each employee is entitled to. The only reason any of this is kept secret is because businesses can exploit their staff.

Commenter

QQQ

Date and time

August 21, 2014, 10:03AM

What's to know. The salaries are excessive and immoral and should be banned. Into the bargain, we are all paying for the Peter Principle. The evidence is the fact that not much actually works properly.

Commenter

kim

Date and time

August 21, 2014, 10:06AM

Yes, of course companies want employees to stay ignorant of what the market price is for labour of various kinds. It is a no-brainer that this is in the company's interest, but it's also a no-brainer that this is directly against the employees' interest. For my money any employer who makes it "almost a sackable offence to talk about salary to others" is very likely to cheat their employees in lots of other ways too, and I'd be looking for another job.

Would you sell a car without knowing what other cars like it fetch? Would you trust a used car dealer who tried to stop you finding out?

Commenter

derrida derider

Date and time

August 21, 2014, 10:21AM

It is a tricky situation as I remember very well being asked by another grad what my salary was and I stupidly told him and found out I was on about 20% more. Good on me you might say but I felt terrible about it as the other person was doing a similar job pretty well the same as me so it was a bit unfair.

On the flip side I know that while I have a similar position there are people on a lower position who are paid more than me. Am I unhappy about it, not necessarily as some how skill sets I don't have and deserve the money but don't have the management experience to be in the higher position. It is all swings and roundabouts in terms of salaries.

One of the best pieces of advice I was given when I was in the early stages of my carreer was that you never question why a person is in a higher position or has a higher salary than you because you don't know why they are where they are. They may have saved the company tens of millions in a prior role or they have experience that prevents problems from occurring that makes it seem they don't really do much.

This touch's on the issue of ageism as experience is only through making the mistakes and listening to others who have made them before you which by default means you are going to be older and wiser. The problem then is that younger people don't get the opportunity to get the experience (hence the rise of the mentoring dogma). Bad luck.

Focus on your own performance and skill sets and do what you are happy with which may in fact require you to change jobs.

Subscribe to ITPro

Editor's Choice

Prime Minister Tony Abbott has bolstered Malcolm Turnbull's ministerial duties, handing him greater responsibility for e-government in a push to expand the use of a single digital identity for Australians.

Data

The new roof that spans Margaret Court arena does more than keep out the weather. Built into the gantries that surround the sliding ceiling are Wi-Fi antennas that beam web access to every ticket holder.